How Texas dealers slammed the door on Tesla

As Tesla Motors fought legislative battles with dealers in numerous states this year, Texas became the only state in which the electric vehicle maker mounted a vigorous challenge to existing franchise laws.

And it's the only state in which Tesla lost its fight outright.

Chalk it up to the legacy of Gene Fondren.

Fondren, the late legislator, lobbyist and longtime head of the Texas Automobile Dealers Association, is credited with making Texas' dealer franchise statute among the toughest in the nation. The statute's ban on factory-owned dealerships, to which Tesla was seeking an exemption, is the strictest of all the states, says Tesla CEO Elon Musk, referring to Fondren as a "really tough dude."

"He worded it six ways to Sunday. Like Green Eggs and Ham, you know," Musk told Automotive News this year. "If you're a manufacturer, you cannot sell it any which way, no matter what. You can't sell it in a house, can't sell it in a mouse, can't sell it in a grouse. It's like, OK, wow. You can't sell it."

Fondren stepped down from the Texas dealers association at the end of 2003 at age 76. He died in 2010. But the staff he built — including the lawyers who have so carefully written franchise bills to cover a variety of circumstances — has stayed.

"We get a lot of calls from other [dealer association] people saying, 'Send me the language for this part of your statute,'" said Bill Wolters, who succeeded Fondren as association president in 2004.

Wolters credits Tom Blanton, COO of legislative affairs and a 33-year association veteran, and Karen Phillips, executive vice president and general counsel with 29 years at the association, with writing the framework of Texas' franchise statute.

Model for other states

"They did a tremendous amount of work in the background, and then Gene would go get the bill passed," said Wolters, who has been with the association for 31 years.

The part of the Texas statute that foiled Tesla was fine-tuned 15 years ago when Ford Motor Co. launched a factory-store initiative, the Ford Retail Network. Ford lost a subsequent challenge to the Texas law.

The Virginia Automobile Dealers Association modeled its language on factory selling after the Texas statute, though it was modified to accommodate some differences in Virginia, said Don Hall, the association's president.

"We'd look at what Texas was doing and then we'd tweak it this way or that way," Hall said. "But it was Fondren who got us the basic language and concept and understanding."

Hall recalls Fondren renting a Washington apartment when the Texas Legislature was in recess to help the National Automobile Dealers Association with federal initiatives.

Influence waning

The Texas dealers association doesn't have the influence in Texas it once did, said Paul Burka, who has covered Texas politics for Texas Monthly for more than 30 years.

"I just think the world has changed, and that's true of all the lobby," Burka said. "More power has passed to the politicians, and they control the lawmaking. And the business lobby doesn't have the power it used to. That's beyond the TADA."

Wolters acknowledges the old-time lobbying days are over in Texas. The culture has changed, as have the ethics laws, he notes: No more wining and dining or big Christmas gift baskets for politicians.

But money still speaks in other ways. Burka said he wasn't surprised when Tesla lost its face-off with Texas dealers.

"Because power follows money, and I think there just wasn't enough money behind the Tesla people," Burka said. "They just didn't have the heft to fight them."

Tesla is expected to take another crack at the Texas statute in 2015, when the next general session of the Legislature opens.

To have a chance at winning then, Tesla will have to spend time and money in the Texas capital and make contributions, Burka said: "If they're going to survive, they're going to have to play the game."